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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
: अपीलाथ( क+ ओर से/ Appellant by Mr.N.Quadir Hoseyn, Adv. & Mr.L. Natarajan, CA : )*यथ( क+ ओर से /Respondent by Ms.Vijayaprabha, JCIT : सुनवाई क+ तार�ख/Date of Hearing 27.03.2018 घोषणा क+ तार�ख / : 27.03.2018 Date of Pronouncement आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER: is an appeal filed by the assessee against the Order of Commissioner of Income Tax (Appeals)-4, Chennai, in dated 19.08.2017 for the AY 2013-14.
Ms. Vijayaprabha, JCIT, represented on behalf of the Revenue and Mr.N.Quadir Hoseyn, Adv. & Mr.L.Natarajan, CA, represented on behalf of the assessee.
It was submitted by the Ld.AR that the assessee is an individual who is a lady of nearly 50 years. It was a submission that the assessee had received a flat at Kotturpuram from her husband’s mother through Settlement Deed dated 18.08.2008. The assessee sold the said flat during the relevant Assessment Year for a sale consideration of Rs.2.25 Crs. and had disclosed the Long Term Capital Gains of Rs.62.50 lakhs. The assessee had claimed deduction u/s.54 in respect of the new construction by her at Thirukazhukundram. It was a submission that the construction was done through one M/s.Rajan Engineering Contractor for a total consideration of Rs.1,54,91,094/-. It was a submission that in the course of the assessment, the AO had issued notice u/s.131 to the Proprietor of M/s.Rajan Engineering Contractor, being one Mr.K.M.Rajan and his statement was recorded u/s.131 on 04.11.2015. The AO, subsequently, recorded the statement of the assessee on 02.02.2016 and was asked to prove the construction of the new house. It was a submission that the assessee was informed that M/s.Rajan Engineering Contractor had stated of renovation of an old house and on the ground that the bills & vouchers were not produced in respect of the assessee’s claim of deduction u/s.54 of the Act, the claim was denied. It was a submission that on account of the non-available of the documentary proof, the assessee’s claim of deduction u/s.54 of the Act was withdrawn in the statement recorded from her on 02.02.2016. It was a submission that on appeal, the Ld.CIT(A) had confirmed the action of the AO. It was a submission that the statement recorded from the Contractor Mr.K.M.Rajan, who is the Proprietor of M/s.Rajan Engineering Contractor, was at Page Nos.19-28 of the Paper Book. The Ld.AR drew our attention to the statement recorded from the assessee on 02.02.2016 at Page Nos.29 & 31 of the Paper Book.
It was a submission that in the statement of the Contractor more specifically at Question Nos.9 to 11 and the answers thereto which read as follows:
9: In Nerumbur, before constructing the house, whether the plot was vacant or any building existing thereon?
A 9: In Nerumbur, there was already an old house. We raised the new house, after demolishing the existing structure.
Q 10: In Nerumbur, by whom and when the old house situated on the site of Mrs.Urmila Prakash was demolished?
A 10: By the end of March 2013, I did demolish the old house of Mrs. Urmila Prakash in Nerumbur with my workers.
Q 11: For the construction of Mrs. Urmila Prakash’s house, how much, when and how you received the amounts?
A 11: For constructing Mrs. Urmila Prakash’s house, I received Rs.40,000/- to Rs.50,000/- every week since the first week of April 2013 till the end of September 2014 and in the aggregate I had received Rs.1,50,00,000/-.
He also drew our attention to Question No.15 and the Answer thereto, which is as follows:
Q 15: When did you complete construction and hand over the house to Mrs.Urmila Prakash? A 15: I have fully completed the construction and handed over the house to Mrs.Urmila Prakash by the end of September, 2014.
Wherein, the construction is stated to have been completed by the end of September, 2014. The Ld.AR further drew our attention to the statement recorded from Mr.K.M.Rajan at Question No.4 and the Answer thereto which reads as follows:
Q 4: Could you explain the details of your Income Tax? A 4: My Permanent Account Number (PAN) AJAPR 1826 L. I will submit copies of acknowledgment for the returns filed for the year 2013-14 and 2014-15.
It was a submission that the existence of the new house, even though, claimed could be verified, even now, has not been done by the AO but had disallowed the claim of deduction u/s.54. It was a prayer that the assessee may be granted the claim of deduction u/s.54 in respect of the new house constructed after demolishing the old existing structure. In regard to Ground Nos.9 & 10, in respect of the indexed cost of acquisition in respect of the house sold, the Ld.AR did not press the said grounds.
In reply, the Ld.DR submitted that the assessee has claimed the construction of new house after demolishing of the old house. It was a submission that the AO on enquiry, in the form of statement recorded from the Contractor showed that renovation had been done and the same was handed over to the assessee. The assessee had withdrawn the claim of deduction u/s.54. It was a submission that the Ld.DR drew our attention to the statement recorded from the assessee which has been extracted in the Assessment Order in respect of Question No.5 and Answer thereto at Page No.2 of the Assessment Order. It was a submission that the claim of deduction u/s.54 has been made in respect of the existing building and no demolition has been done and minor renovation, if at all, has been done and the same would not entitle the assessee u/s.54. The Ld.DR drew our attention to the order of the Ld.CIT(A) at Para No.17 to submit that even though, the Ld.CIT(A) has granted the assessee another opportunity to prove the claim for deduction u/s.54, the assessee was unable to produce even a single documentary evidence to substantiate the claim. It was a submission that the claim of deduction u/s.54 was an afterthought and was not substantiated as has been recorded by the Ld.CIT(A) in Para No.17 of his order was made with malafied intention.
She vehemently supported the order of the AO & the Ld.CIT(A).
We have considered the rival submissions.
At the outset, a perusal of the statement recorded from Mr.K.M.Rajan, Proprietor of M/s.Rajan Engineering Contractor, has been recorded by the AO by invoking the powers u/s.131 of the Act on 04.11.2015. The statement in its entirety reads as follows:
“SWORN STATEMENT OF Mr.K.M.RAJAN, Proprietor/Contractor, Rajan Engineering, S/o Mathew, residing at No:146, Dhargha Road, Katcherimalai, Old Pallavaram, Chennai: 600 043 taken under Section 131 of Income Tax Act, 1961 on 04-11-2015. OATH ADMINISTERED OATH TAKEN Question 1: Did you understand the implications and punishments of furnishing false statement under the Income Tax Act? Answer 1: After your explanation, I have understood the implications and punishments of giving false statement. Q 2: Could you explain about yourself and your profession? A 2: I had been working as a mason in the construction industry for the past several years. During the past ten years, I have been executing piecemeal works in the name of Rajan Engineering Contractor.
Q 3: Do you maintain account books for your construction works?
A 3: I am not maintaining account books for my construction works. Every year, I estimate my income and file my returns accordingly.
Q 4: Could you explain the details of your income tax?
A 4: My Permanent Account Number (PAN) AJAPR1826L. I will submit copies of acknowledgement for the returns filed for the year 2013-14 and 2014-15.
Q 5: Could you give details about what are all the banks in which you keep accounts since 01.04.2013?
A 5: I am having account with SBI Pallavaram Branch SB A/c No.300251841. I shall furnish the bank statement from 01.04.2013 to 11.09.2015.
Q 6: How do you know Mrs. Urmila Prakash? What sort of professional exchange you are having with her?
A 6: I had executed several pieces of construction works at her Rutland Gate House in Nungambakkam. Later on, at her behest, I built her house in Nerumbur coming under the Thirukaghukundram Panchayat.
Q 7: Did you enter into any agreement in constructing the aforesaid house. Give a copy of that agreement.
A 7: I entered into an agreement on 05-03-2013 with Mrs.Urmila Prakash. I shall submit the copy to you.
Q 8: Do you have any plan approval for building this house?
A 8: We did not obtain any plan approval for building this house because it comes under the jurisdiction of the Gram Panchyats limits.
Q 9: In Nerumbur, before constructing the house, whether the plot was vacant or any building existing thereon?
A 9: In Nerumbur, there was already an old house. We raised the new house, after demolishing the existing structure.
Q 10: In Nerumbur, by whom and when the old house situated on the site of Mrs.Urmila Prakash was demolished?
A 10: By the end of March 2013, I did demolish the old house of Mrs. Urmila Prakash in Nerumbur with my workers.
Q 11: For the construction of Mrs. Urmila Prakash’s house, how much, when and how you received the amounts?
A 11 :For constructing Mrs. Urmila Prakash’s house, I received Rs.40,000/- to Rs.50,000/- every week since the first week of April 2013 till the end of September, 2014 and in the aggregate I had received Rs.1,50,00,000/-.
Q 12: For constructing the aforesaid house, from whom and how did you purchase the requisite materials such as bricks, bluestones, sands, cement and iron rods? Also furnish the names and addresses and the bills given by them?
A 12: For cements and rods, I paid cash and purchased from Vinayaga Hardwares, Nerumbur. For this, I do not have any bills. I also paid cash in purchasing bricks, sand and bluestones (jalli) from Balu of Nerumbur. I don’t know the address or mobile phone numbers of the aforesaid persons.
Q 13: Explain the area and the number of rooms that you constructed for Mrs. Urmila Prakash in Nerumbur?
A 13: In the land of Mrs Urmila Prakash at Nerumbur, spread over 100 acres, I constructed 2160 sq.ft. ground floor and an upper storey with a swimming pool. In the ground floor, there are three bedrooms, one kitchen, one hall and three bathrooms with a sitout. In the upperstorey, I constructed a hall, two bedrooms, one kitchen and two bathrooms. I also constructed a swimming pool measuring an extent of 30’x18’.
Q 14: Till August 31, 2013 how much money did you receive from Mrs.Urmila Prakash?
A 14: I received Rs.25.00 lakhs in cash till 31.08.2013 for labour and materials put together.
Q 15: When did you complete construction and hand over the house to Mrs.Urmila Prakash?
A 15: I have fully completed the construction and handed over the house to Mrs. Urmila by the end of September, 2014.
Q 16: For constructing the aforesaid house, did you give any bill in writing to Mrs. Urmila Prakash?
A 16: Mrs. Urmila Prakash used to give cash every week and with that I constructed the house after paying for labour and materials. I have not given any bills to Mrs. Urmila Prakash.
Q 17: How many workers were used in constructing the aforesaid house? How did you disburse the wages to them? Whether you have any voucher for that?
A 17: I employed six mastri (supervisors) and eight helpers for constructing the house. I have paid them wages/labour charges every week. I have not kept any voucher for these payments.
Q 18: Mrs. Urmila Prakash has submitted your final invoice dated 20.01.2015. Have a look at it. Is the Invoice given by you? While answering to Question Number-16 you stated that you have not given any bill. Explain this.
A 18: The signature in the final Invoice dtd. 20.01.2015 shown by you is mine. But the details in the Invoice and attached other bill of quantities have been prepared by Mrs.Urmila Prakash who obtained my signature.
Q. 19: In your final Invoice dtd. 20.01.2015, there appears six items that show a gross amount of Rs.1,54, 91,000/-. But in responding to Question-3 you said that you do not maintain any account books. While this be the case, how is it that you entered an exact sum of Rs.24,54,466/- for each and every work such as designing and supervising charges. How is it feasible?
A 19: The details and the amounts specified in the final Invoice dtd. 20.01.2015 have been typed in my letter-head by Mrs Urmila Prakash and my signature obtained thereon. Since I did not maintain books of accounts, I signed the final Invoice prepared by her for the amount paid by her.
Q 20: In the aforesaid final Invoice dtd. 20.01.2015, it is written that a sum of Rs.1,55,00,000/- as advance has been received by you in June 2013. But in responding to Question Number-14, you had stated that you had received Rs.25.00 lakhs till 31.08.2013. Explain this.
A. 20: As stated in Question Number-14, I received about Rs.25.00 lakhs till 31.08.2013 in cash from Mrs. Urmila Prakash. While responding to Question Numbers 18 and 19, the final Invoice dtd. 20.01.2015 was prepared by Mrs. Urmila Prakash and she obtained my signature thereon. I have not received Rs.1,55,00,000/- in June 2015.
Q 21: Did you construct any other house like the aforesaid house?
A 21: I have been executing only piecemeal work as stated earlier. I have not constructed any other house for anybody like this house.
Q 22: Did you keep any memorandum book for constructing this house?
A 22: I have not kept any memorandum book for constructing this house.
Q 23: The attachments accompanying the final Invoice reveals BoQ. For executing the work detailed thereon, beams/pillars must perforce have to be erected. Besides, laying weathering course, plastering, masonry, painting and polishing and other incidental works ought to be done. For executing this dexterous work skilled manpower is required. Whom did you employ to execute all these works?
A 23: I have not done all the works listed above. I laid weathering course and did plastering and painting, besides laying tiles in some places. I do not know about carpentry/woodwork. Mrs. Urmila Prakash engaged some other persons for carpentry. I did plastering for the roof in a few places. I have not done any other work.
Q 24: Do you want to say anything else?
A 24: As I have stated earlier, I have done only some construction work. I do not know the details of other works shown in the final Invoice dated 20.01.2015. Those jobs have been done by other persons employed by Mrs. Urmila Prakash. Other than this, I have nothing else to say.